Monetary policy

We use monetary policy to maintain price stability and support maximum sustainable employment as defined in the Remit to the Monetary Policy Committee (MPC).

The current Remit requires us to keep inflation between 1 and 3 percent on average over the medium term, with a focus on keeping future average inflation near the 2 percent target midpoint. There is no numerical target for employment, as we use a range of different indicators to assess the maximum sustainable level.

We  implement monetary policy by setting the Official Cash Rate (OCR), which is reviewed seven times a year.

We publish the Monetary Policy Statement (MPS) quarterly. Each Monetary Policy Statement must set out:

  • The approach the Monetary Policy Committee (MPC) is taking to achieve its operational objectives defined in the Remit;
  • The MPC’s reasoning for adopting that approach, and;
  • The transparency and accountability requirements of the MPC Charter:
    • explain how the MPC has sought to meet the requirements of section 2b of the Remit;
    • if inflation outcomes (and/or expected outcomes) are outside of the target range, explain the reason for this;
    • explain how monetary policy is currently supporting maximum sustainable employment.

We use monetary policy to maintain price stability and support the maximum sustainable level of employment as defined in the Remit. The current Remit requires the Bank to keep inflation between 1 and 3 percent on average over the medium term, with a focus on keeping future average inflation near the 2 percent target midpoint. We implement monetary policy by setting the Official Cash Rate (OCR), which is reviewed seven times a year.

Like most central banks, we typically implement monetary policy by controlling the Official Cash Rate (OCR), which influences the price of borrowing money in New Zealand.

The Global Financial Crisis and more recent COVID-19 pandemic has led many foreign central banks to turn to other monetary policy tools, as their ability to lower short-term policy rates such as the OCR became constrained.

This page outlines the range of tools we are currently using, and some new tools we are developing, to control inflation, maximise employment and support economic wellbeing.

Inflation is the term used to describe a rise of average prices through the economy. It means that money is losing its value. This section provides a variety of resources that explain inflation and deflation. This connects to how we use monetary policy to maintain price stability.

We use monetary policy to control inflation and keep it within a specific target band. Find out about how we use and implements monetary policy to maintain price stability.

The Monetary Policy Committee (MPC) is responsible for formulating monetary policy in New Zealand, directed towards the economic objectives of:

  • achieving and maintaining stability in the general level of prices over the medium term; and
  • supporting maximum sustainable employment.

The Remit, Charter and Code of Conduct are key components of New Zealand’s monetary policy framework. The Remit provides the Monetary Policy Committee (MPC) with its operational objectives, consistent with the economic objectives in Section 8 of the Reserve Bank of New Zealand Act (1989).

The MPC will also be bound by the MPC Charter. The Charter provides directions on decision making procedures, transparency and accountability.